Wow what a difference a few days makes. Within the last 7 days, 1,395 properties went under contract in the metro area. During the same week 939 properties sold and closed and there were 735 new listings. In summation, it is still a seller’s market based on inventory and activity.
As I work in the deluxe and luxury market I am seeing some signals that the weakness in the upper-end may be abating OR sellers are becoming more realistic. In Cherry Creek North (I consider 1st Avenue on the south, 6th Avenue on the north, University Boulevard on the West and Colorado Boulevard on the East as boundaries) I noticed listings on the market asking under $1M seem to be generating activity and going under contract.
For fun I ran an informational statistical analysis. In the beginning of January 2016 the average listing in Cherry Creek North was asking $480 PSF above grade. This morning the average asking above grade is $414 PSF. I assume some residences have sold, other listings have been withdrawn or expired. However I believe more telling; listings coming on the market in the last two months have been priced more realistically and many under $1M thus generating additional activity and demand.
While some of my peers may begin to panic, this is the sign of a healthy marketplace or as I suggest coming back to reality. At $480+ PSF one may suggest a bubble was forming. Instead we are seeing a sense of equilibrium heading back into the marketplace. Yes, Cherry Creek North is a unique niche of the market and accounts for a minuscule part of the overall metro area HOWEVER from experience I look to the luxury market to read the tea leaves concerning the overall metro area.
Granted this is far from scientific; however the upper and luxury markets do tend to mirror the economy. I personally know a few retail analysts on Wall Street who visit luxury retailers to gauge the overall activity within the bricks and mortar stores to assess economic health and psychological predictors i.e. spending on attainable luxury suggests an overall positive view of future economic activity.
In speaking with a mortgage lender over lunch this past week; we are both market watchers and agreed at present the market seems to be moving towards equilibrium. With the number of houses on the market still oriented towards a seller’s market; prices may continue to rise yet at an abated rate closer to inflation (which continues to be minimal). Yet once we start seeing a spike in listings i.e. above 10,000 units in the metro area we may be in for a snowball effect with additional listings coming on the market and demand regressing. If this happens and we move into a buyer’s market coupled with potentially higher interest rates the end of our expansion era may happen.
Yet this is not a negative. For many years Denver Metro has been an attractive destination based on lifestyle factors i.e. employment opportunities, weather, recreation and until recently affodable housing. The recent influx of residents has truly strained some of our infrastructure which needs time to catch up coupled with houses prices exceeding average income and decreasing affordability. While positive for an existing homeowner, a challenge for the newly arrived or those who desire to relocate.
While I do not desire a hard downturn, I do wish for a more balanced market including options for first-time homebuyers not being banished to the exurbs for affordability (which only increases metro wide trafffic congestion and lessens air quality), availabile inventory for move-up and move down (empty-nester) buyers and additional options for our aging longer-term resident population.
As one client confided to me “we need to move into a more balanced market so my child can move from our basement to a home of their own”. And I say to that “Amen”.